| ON DECK FOR MONDAY, JUNE 3 |
KEY POINTS:
- Stocks, bonds have richening bias to start a fresh week
- Most of the week’s developments unfold in the back half
- Markets are frowning upon Mexico’s election results…
- …but gleefully welcoming India’s polling estimates ahead of official results
- Oil prices largely shaking off OPEC+ surprise
- US to update ISM-manufacturing, vehicle sales, construction spending
- Canada to update manufacturing PMI
- Global Week Ahead reminder
While most of the week’s action will unfold over the back half of the week, there are several noteworthy macro drivers to consider this morning. Elections in Mexico and India are having opposite market effects, oil prices are barely reacting to the OPEC+ meeting and US data lies ahead. Stocks are mostly higher across the major exchanges, sovereign bonds have a small richening bias, and the USD is little changed.
Peso Sinks on Mexican Election Outcome
Well, one of North America’s elections over the next 17 months is over and the electorate decided to grant a leftist administration broader support. The Mexican peso is frowning upon the outcome of the election and is about 2% weaker to the dollar so far this morning. Claudia Sheinbaum won the Presidency by an estimated 30 percentage points, and with her associates appear to have won a super majority in the lower house and senate. Expansionist fiscal policy, sector-specific risks and constitutional changes are at stake.
Indian Stocks Soar as Polling Indicates Strong Modi Victory
Indian markets were much more welcoming toward polls that are indicating Narendra Modi and his Bharatiya Janata Party alliance will win a majority when the official results of the weeks-long vote arrive tomorrow. Indian stocks advanced by over 3% and the rupee appreciated a touch. Stocks like it because Modi is perceived to be relatively friendlier toward markets than others and because of the magnitude of victory that may make it more possible to advance needed reforms. A risk concerns the need to keep Modi’s autocratic tendencies in check.
Oil Prices Shake Off OPEC+ Supply Surprise
Oil prices are taking the weekend OPEC+ virtual meeting in stride so far. WTI and Brent are little changed despite the potential addition of supply. The dysfunctional oligopoly extended production cuts as expected, but what was unexpected was the announcement that the cuts would be gradually phased out starting in October.
US Macro Updates on Tap
The US will update several readings today with the main one being ISM-manufacturing for May (10amET). It is expected to barely remain in contraction territory and also watch the prices paid measure.
US vehicle sales for May land later this afternoon as industry guidance points toward a modest rise toward 16 million SAAR based on sampling skewed toward the first 16 selling days of the month’s total of 26 selling days. That level has not been breached since May 2021. Also watch construction spending for April (10amET).
Canada updates the manufacturing PMI for May this morning (9:30amET) after signalling modest contraction of late.
As a reminder, please see the Global Week Ahead—Can Macklem Keep his Word? It should be in your inboxes or the general public version is here. There is no chart deck version this week.
Key topics:
- Will the BoC cut or hold? The cases for both & expectations
- ECB expected to begin easing—but should it?
- Will Canada’s jobs boom continue?
- Temps are swamping the Canadian summer job market
- US payrolls may be looking a tad Canadian
- Mexico’s election primer
- RBI expected to hold
- OPEC+ meeting probably won’t rock the boat
- Global macro
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